Credit card spends at 8-month low in May; HDFC Bank loses 5.3 lakh credit card customers since ban

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The latest cards data released by the Reserve Bank of India shows the total credit card spends fell to Rs 548 billion in May, recording a more than a 7 percent decline from Rs 592 billion in the previous month.

Credit card spends at 8-month low in May; HDFC Bank loses 5.3 lakh credit card customers since ban
Credit card spends fell to an eight-month low in May amid localised lockdowns imposed by states to battle the second wave of coronavirus. The latest cards data released by the Reserve Bank of India (RBI) shows the total credit card spends fell to Rs 548 billion in May, recording a more than a 7 percent decline from Rs 592 billion in the previous month. Credit card spends for the month of May were lower by at least 14 percent than the average of the last three months.
While card spends remained lower than the pre-pandemic levels, the latest data shows that the impact of the second wave on spends is lesser than the first. May 2021 credit card spend of Rs 548 billion was still higher than the spending seen during the April-September 2020 period of Rs 209-511 billion. Going ahead, a recovery is expected as the second wave has peaked, and lockdowns/restrictions on activities have largely been eased across states.
According to the ICICI Securities report, the trends of spends from June till date indicate an 18 percent jump compared to May. This puts June 21 spend trend at a higher level compared to all months of FY21, except March.
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"One can expect the recovery in June 2021 given: a) 12 percent MoM growth in UPI payments in June 2021, and b) average daily POS/e-commerce spend has been 22 percent higher in June 2021 at Rs 16 billion vs Rs 13 billion in May 2021," ICICI Securities said in a report.
The net credit card issuance has also been slowing down since January 2021, data showed. 701,000 new cards were added in the month of January 2021, 549,000 in February, 402,000 in March and 211,000 in April.
Outstanding credit cards in the market increased by 133,000 in May, with the total number of credit cards issued at 62.39 million compared to 62.26 million in April.
HDFC Bank's Loss is ICICI Bank’s Gain
An analysis of the card's data also shows that HDFC Bank has lost a significant number of customers, while its rivals have gained at its cost. The RBI had banned HDFC Bank from adding new credit card customers in early December last year after a series of technology outages at the bank over the previous years.
RBI data shows that between the end of November 2020 and the end of May 2021, HDFC Bank, the largest player in the credit card market, still had lost almost 5.3 lakh customers. Its total credit card outstanding stood at 14.85 million as of May 31, 2021, compared to 15.38 million as of November 30, 2020.
ICICI Bank said the value of the lenders' credit card transactions for May is less than what appeared in the RBI data release, and it has submitted an updated return to the regulator.
The value of transactions at the POS (Point of sales) for May 2021 was Rs 951,746 lakh and not Rs 1,223,298 lakh as appeared in the recent data release on "Bankwise ATM/POS/Card Statistics- May 2021", the bank said.
The bank's credit card transactions at POS grew by about 124 percent year-on-year by value in May 2021, while market share by value in credit card transactions at POS was about 18 percent in May 2021 compared to about 13 percent in May 2020, the bank said.
There are minor updates in the number of credit card transactions at POS and the value and number of credit card transactions at ATM. There is no change in the other data including the total number of credit cards as published in the data release mentioned above, ICICI Bank said.
At the same time, ICICI Bank, which had 9.71 million outstanding credit cards as of November 30, gained over 11.6 lakh customers by the end of May this year. SBI Card, the second-largest player in the credit card market, also gained 6.6 lakh customers, Axis Bank another 2.4 lakh, RBL Bank 1.8 lakh, and so on. Citibank India, which announced its plans to shut its India retail operations earlier this year, also lost about 1.2 lakh customers in the same period, data showed.
"Based on the number of cards, HDFCB lost 180bps of market share as of May 2021 since the end of November 2020 (the ban on the launch of new credit cards came into effect for HDFCB in early December) to 24 percent while ICICI and SBI Cards gained 130bps and 37bps to 17.4 percent and 19.2 percent, respectively," Suresh Ganapathy of Macquarie said in a report.
"Looking at total spends, since November 2020, ICICI has gained 820bps market share while HDFCB and SBI cards have lost 370bp/180bp market shares," Ganapathy added.
While most banks saw declines in spends in the past three months, ICICI maintained spends at a high level. "We believe, ICICI's co-branded card with Amazon (1.6 million as of March 2021), which forms more than 50 percent of incremental card additions, has helped it to scale up its credit card business in a significant way," Macquarie said.
The ban has hurt HDFC Bank's credit card business significantly. Its market share in outstanding credit cards has fallen to 23.8 percent as of May 2021, a 150 basis point decline over last year. Similarly, its market share in credit card spends fell by a steeper 400 basis points over the previous year to 27 percent in May 2021.
In a recent press conference, HDFC Bank promised to get back to the market "with a bang” once the “temporal” embargo is lifted and recoup the losses. The bank’s head of consumer finance, digital banking and information technology, Parag Rao, said it has used the last six months to "introspect, re-engineer and innovate" about the cards business.
"We have got very aggressive plans to get back in the market with a big bang...You will rapidly see HDFC Bank not just regaining market share but also significantly increasing our spend market share," Rao said.
HDFC Bank believes that within 3-4 months of the RBI ban getting lifted, there would be a correction in the incremental market share back to the pre-ban levels, the launch of new products and features and also partnerships that have been forged during this period.
"We were very clear that this is at best a temporal situation. During the six months when we were not issuing new credit cards, we increased our merchant acceptance base, our liability franchise increased and today we are sitting on a large base of already analytically data mined customers who have already kept ready and pre-approved," Rao said.
On December 2, the RBI issued an order to HDFC Bank with regard to certain incidents of outages in the internet banking, mobile banking, and payment utilities of the bank over the past two years. This included the recent outages in the bank's internet banking and payment system on November 21, 2020, due to a power failure in the primary data centre.
The RBI advised the bank to temporarily stop all launches of the digital business generating activities planned under its programme Digital 2.0 (to be launched) and other proposed business generating IT applications, and sourcing of new credit card customers.
 
CREDIT CARD SPENDS (POS Spends)
​ 
MonthPOS Spend (Rs Billion)
Jan 20670
Feb 20625
Mar 20507
Apr 20209
May 20323
Jun 20428
Jul 20456
Aug 20503
Sep 20511
Oct 20647
Nov 20623
Dec 20636
Jan 21648
Feb 21600
Mar 21723
Apr 21592
May 21548
 
CREDIT CARD ISSUANCE
* Net card additions slowing down since January 2021
 
MonthNo. of Cards (in million)Net Additions (in 000s)
Jan 2056.12787
Feb 2057.161038
Mar 2057.75587
Apr 2057.36-385
May 2057.18-180
Jun 2057.29109
Jul 2057.63343
Aug 2057.83199
Sep 2058.69864
Oct 2059.42726
Nov 2060.11693
Dec 2060.40284
Jan 2161.10701
Feb 2161.65549
Mar 2162.05402
Apr 2162.26211
May 2162.39133
 
HDFC BANK BAN IMPACT
 
BankCards Outstanding as of Nov 30, 2020 (in mn)Cards Outstanding as of May 31, 2021 (in mn)Absolute Change (in mn)
HDFC Bank15.3814.85- 0.53
SBI Cards11.2911.95+ 0.66
ICICI Bank9.7110.87+ 1.16
Axis Bank6.887.12+ 0.24
RBL Bank2.853.03+ 0.18
Citi Bank2.732.61- 0.12
Kotak Mah Bank2.332.31- 0.02
IndusInd Bank1.481.56+ 0.08
American Express1.611.49- 0.11
Yes Bank0.840.96+ 0.12
Standard Chartered1.431.45+ 0.02
 

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CompanyPriceChng%Chng
Tata Motors295.55 -7.00 -2.31
Grasim1,549.50 -32.55 -2.06
Larsen1,611.75 -30.40 -1.85
Adani Ports680.05 -11.75 -1.70
Tech Mahindra1,131.00 -17.60 -1.53
CompanyPriceChng%Chng
Larsen1,612.00 -29.55 -1.80
HUL2,359.25 -19.40 -0.82
Reliance2,105.20 -15.80 -0.74
Asian Paints3,083.20 -21.25 -0.68
NTPC118.50 -0.80 -0.67

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